LP sentiment towards PE improves

Investor sentiment towards private equity is up in the first half of 2018, according to a survey by advisor Rede Partners, in part due to a bounce-back among North American LPs.

The firm’s H2 Liquidity Index puts investor sentiment towards private equity at 65 on a scale where no change in sentiment is equivalent to 50, a more positive sentiment scores above 50 and less positive sentiment below.

The latest figure is up slightly on the 62 recorded in the second half of last year, suggesting LPs expect to commit slightly more to private equity in the 12 months ahead.

Overall, 95 percent of respondents said they would maintain or increase their private equity allocations over the next 12 months.

This positivity was driven by North American LPs, whose sentiment towards deploying in primary funds was at 65 on the scale, compared with 51 in second half of 2017. Sentiment towards primary fund deployment by European LPs was down slightly at 66, from 69 last time around.

“Through a year of tax reform, buoyant equity markets and political uncertainty, investments in the asset class have outperformed and LPs plan to deploy more capital in the year ahead,” said co-founder of Rede Partners Scott Church. “As equity volatility has been reintroduced to the market in 2018, we can expect institutional investors to continue to allocate to private equity … to anchor more stable returns.”

In general, LPs were enthusiastic about investing in new relationships, which hit 64 on the sentiment scale, compared with 61 for existing relationships. Endowments were especially keen on building new bridges, registering sentiment of 76.

Investor attitude towards secondaries was more muted at 45, slightly up on the 43 recorded in the second half of last year but down on the 52 recorded in the first half of 2017. This is due to record fundraising in 2016 and 2017, according to Rede.

The findings are based on the views of 166 global institutional LPs representing over €6.4 trillion in assets under management and approximately €1.3 trillion in capital allocated to private equity.